Military Pension Reform: Blink and You Missed It

In a disappointing show of political panic, Congress last week overturned a reasonable reform it passed just last December in future cost-of-living adjustments for military pensions going to working-age beneficiaries. President Obama signed the reversal legislation last weekend.

The episode does not bode well for future reforms in military benefits – or perhaps in any “mandatory” benefits, which are not subject to annual congressional appropriations. Yet mandatory spending is a key driver of the large federal deficits projected for the coming years.

In December lawmakers approved the reform as part of a bipartisan deal on budgets for Fiscal 2014 and 2015. The provision reduced the cost-of-living increases by up to 1 percent for the pensions of beneficiaries under age 62.

January legislation addressed some obvious concerns by exempting disability retirees and some survivors. Yet veterans groups still blasted the reform, and lawmakers soon joined in the denunciations of their own handiwork.

A Senate plan even ignored the pay-as-you-go principle, which calls for new spending to be offset elsewhere in the budget. The estimated cost of repeal: $6.8 billion over the coming decade.

The House bill at least included a way to cover this cost, although not until 2023, when sequestration for Medicare and other mandatory programs is to be continued for another year. The House passed that bill Tuesday on a 326-90 vote, and the Senate approved it 95-3 on Wednesday.

We’ll see in nine years if Congress follows through on paying for the change. But that’s a long time to wait for a budget offset.